Rice May Triple in 18 Months as Supplies Tighten, Duxton’s Peter Forecasts
Fed Details Emergency Lending
– As a result of the Dodd-Frank financial-overhaul law passed in July, the Federal Reserve
must reveal a trove of information about the banks, securities firms, other companies and central banks that were helped by various emergency programs created during the financial crisis. The data released Wednesday include short-term liquidity moves for financial institutions and companies made as part of the Fed’s traditional role as lender of last resort, liquidity injections directly to borrowers and investors in key credit markets and financial support for Bear Stearns
Cos. and American International Group
Inc. (See all the data from the Fed
) Fed officials reported details on more than 21,000 transactions from December 2007 to July 2010. The emergency programs caused the size of the Fed’s balance sheet to swell. (See a history of the Fed’s lending
) While some of the programs have been wound down as the health of financial markets improved, the Fed still holds most of the assets it took on during the crisis. As of Nov. 17, the Fed had $2.3 trillion in assets.
Bond Markets Raise Stakes for ECB Meeting
– European bond investors are raising expectations that the European Central Bank
will use its monthly meeting Thursday to forcefully prop up government bond markets of its beleaguered periphery by, among other things, ramping up purchases of government debt. Those hopes appear to be based on seemingly innocuous comments by ECB President Jean-Claude Trichet
to the European Parliament Tuesday. He told parliamentarians that the ECB’s six-month-old program to buy government bonds of peripheral countries is “ongoing” in order to ensure a smooth transmission of monetary policy. Mr. Trichet’s comments reflect the obvious, but analysts at Barclays Capital
and elsewhere took Mr. Trichet’s comments — he also warned, as he often does, against underestimating the resolve of euro zone governments in dealing with Europe’s fiscal woes — to suggest that the ECB is poised to step up its bond buys. Yield spreads between government bonds of Spain, Italy and other peripheral countries fell Wednesday on those hopes.
Brookings Global MetroMonitor
– The global financial crisis of the late 2000s precipitated an economic downturn of such magnitude and reach that many now refer to the period as the “Great Recession.” According to the International Monetary Fund, global economic output, which had grown at an annual rate of 3.2 percent from 1993 to 2007, actually shrank by 2 percent from 2008 to 2009. A precarious economic recovery is now underway. Aggregate views of the global economy, however, mask the distinct experiences of its real hubs—major metropolitan areas. Metro areas, which are economically integrated collections of cities, suburbs, and often surrounding rural areas, are centers of high-value economic activity in their respective nations and worldwide. And because metros form the fundamental bases for national and international economies, understanding their relative positioning before,during, and after the Great Recession provides important evidence on emerging shifts in the location of global economic resilience and future growth. The Global MetroMonitor
examines data on economic output and employment in 150 of the world’s largest metropolitan economies, located in 53 countries, from 1993 to 2010. View trends for individual metropolitan areas »
Republicans say they’ll block bills until tax cuts are extended – Senate Republicans threatened Wednesday to block virtually all legislation until expiring tax cuts are extended and a bill is passed to fund the federal government, vastly complicating Democratic attempts to leave their own stamp on the final days of the post-election Congress. "While there are other items that might ultimately be worthy of the Senate’s attention, we cannot agree to prioritize any matters above the critical issues of funding the government and preventing a job-killing tax hike," all 42 GOP senators wrote in a letter to Majority Leader Harry Reid, D-Nev. The 42 signatures are more than enough to block action on almost any item he wishes to advance.
ADP: Private Employment increased by 93,000 in November
– ADP reports
: Private-sector employment increased by 93,000 from October to November on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The estimated change of employment from September to October was revised up from the previously reported increase of 43,000 to an increase of 82,000. This month’s ADP National Employment Report shows an acceleration of employment and suggests the nation’s employment situation is brightening somewhat. November’s gain in private-sector employment is the largest in three years. This is the tenth consecutive month of gains, which have averaged 47,000 during that period. Nevertheless, employment gains of this magnitude are not sufficient to lower the unemployment rate, which likely will remain above 9% for all of 2011.
Was private or public debt at fault in Europe?
– The full (short) paper is here
, recommended. Excerpt: [apart from Greece]…the root cause of the debt problems is to be found in the unsustainable debt accumulation of the private sectors. From 1999 until 2008, when the financial crises erupted, private households in the eurozone increased their debt levels from about 50% of GDP to 70%. The explosion of bank debt in the eurozone was even more spectacular and reached more than 250% of GDP in 2008. Surprisingly, the only sector that did not experience an increase in its debt level during that period was the government sector, which saw its debt decline from 72 to 68% of GDP. Ireland and Spain, two of the countries with the severest government debt problems today, experienced the strongest declines of their government debt ratios prior to the crisis. These are also the countries where the private debt accumulation was the strongest.
US Natural Gas, Oil reserves soar – U.S. natural gas reserves increased by the most in history last year, and crude reserves also rose, as companies drilled frantically into shale rock formations with new technology, the Energy Information Administration said in an annual report on Tuesday. U.S. net proved natural gas reserves rose 11 percent, or 28.8 trillion cubic feet (tcf), in 2009 to total 284 tcf, underscoring the dramatic impact that new gas pumped from shale rock formations is having on world energy supply. Louisiana, whose statewide reserves grew quickest, saw its economically viable gas reserves surge by 77 percent, or 9.2 tcf, led by developments in its Haynesville Shale. U.S. net proved crude oil reserves rose 9 percent, or 1.8 billion barrels, to 22.3 billion barrels in 2009. Texas saw its proved oil volumes rise most, by 529 million barrels, or 11 percent. North Dakota, home of the oil-rich Bakken Shale formation, saw its reserves jump by a whopping 83 percent, or 481 million barrels.
End Ethanol Subsidies, Senators Say – Subsidies and tariffs to promote domestic ethanol production are “fiscally irresponsible and environmentally unwise” and should be ended, a bipartisan group of United States senators declared in a letter to the chamber’s leaders on Tuesday. “Eliminating or reducing ethanol subsidies and trade barriers are important steps we can take to reduce the budget deficit, improve the environment, and lessen our reliance on imported oil,” the senators wrote to the Democratic majority leader, Senator Harry Reid, and the Republican minority leader, Senator Mitch McConnell. The letter was circulated by Dianne Feinstein, Democrat of California, and John Kyl, Republican of Arizona. Supporters of domestic ethanol call it a cleaner-burning fuel than gasoline that offsets oil imports from autocratic regimes abroad and creates American jobs. But the growing appetite of ethanol refiners for the American corn crop has steadily driven up the price of food worldwide, while increased demand for corn has caused an rise in fertilizer use and pesticide-intensive agriculture in the United States.
Some European GDP Statistics
– The above data is from Eurostat
, and shows real GDP normalized to have 2007 Q4 at 100. The countries selected are the PIIGS, along with France and Germany for comparison. All of these use the euro as currency, so there are no exchange rate movements involved in the above curves. As you can see, France and Germany went through the recession similarly, hit the trough in Q1 of 2009, and are now in an ongoing recovery, with real GDP now above pre-recession values. Ireland is uniquely badly off, with GDP down to only just above 80% of pre-recession values, and still not much sign of an actual recovery. As of the last data, the Greek economy was contracting, but is nowhere near as badly off as Ireland. Portugal and Spain were recovering, but very weakly. Ireland is experiencing an event that is on the scale of the Great Depression in terms of the impact on economic output.
Some European Unemployment Rates – For the same group of countries as yesterday, here is the unemployment rate since 2000. You can see that the PIIGS countries all range from bad to terrible. Both Spain and Ireland look dreadful with unemployment very high and still no clear sign of even stabilizing, let alone recovering. Greek unemployment is increasing rapidly, and both Italy and Portugal, although not as high, look like they could still go higher.By contrast, French unemployment clearly appears to have stabilized, and German unemployment is low and falling. I imagine there will be major political shifts in countries with unemployment this high.
Euro Zone Members as U.S. States
– Ireland is a small economy. How small? Its total output is roughly that of the state of Connecticut. But its troubles threaten to spread to other European economies, some small (like Portugal) and some sizeable (like Spain.)
To get a sense of scale, Real Time Economics compared the 2009 output of goods and services for members of the euro zone to the output of U.S. states. The economy of Spain, for instance, is about the same size as the combined economies of Texas, Oklahoma, New Mexico and Arkansas. Italy is nearly as big as Illinois, Indiana, Michigan, Ohio, Wisconsin and Kentucky combined. Meanwhile, hopes for rescue rest on the shoulders of France, whose economy is bigger than that of the entire West Coast including Alaska, Hawaii and the U.S.’s largest state California, and on Germany, which is about the size of New York, New Jersey, Pennsylvania, Maryland, Virginia and North Carolina — plus the District of Columbia.
What’s Wrong with This Picture? – A recent Gallup poll tells us that Americans Prioritize Deficit Reduction as a Strategy. Asked to choose the "best approach for Congress and the president in dealing with the economy, responses break down as follows: Reduce the deficit/debt – 39%; Increase taxes on the wealthy – 31%; Cut Taxes – 23%; Increasing stimulus spending – 5%. The article goes on to say: The increased government spending in late 2008/early 2009 to bail out major U.S. corporations and attempt to jump-start the economy concerned many Americans and helped fuel the Tea Party movement, leading to significant Democratic losses in Congress in the midterm elections. That concern is also reflected in Americans’ endorsing deficit reduction as an economic strategy over generally popular approaches like tax cuts or tax hikes on the wealthy. OK. Now I’m really confused. Last time I checked, a tax hike on the wealthy was estimated to reduce the deficit over the next 10 years by about $700-800 billion. (See Linda Beale’s blog at ataxingmatter for an excellent summary.) So the 39% who favor deficit reduction should favor a tax hike on the wealthy, yes? But do they? Probably not all of them (based on the party line breakdown in the Gallup results).
Deaths from climate-related disasters more than double in 2010 – Oxfam – Climate-related disasters killed 21,000 people in the first nine months of this year, more than double the number in 2009, the humanitarian organization Oxfam reported on Monday. Timed to coincide with the start of international talks tackling climate change in Cancun, Mexico, the report cited floods in Pakistan, fires and heat waves in Russia and sea level rise in the Pacific island nation of Tuvalu as examples of the deadly consequences of climate change.The new round of U.N. climate negotiations aims to agree on a narrow range of issues dividing rich and poor economies, specifically on funding, preservation of rainforests and preparations for a warmer world. The talks also will seek to formalize existing targets to curb greenhouse gas emissions.
Climate Change Is Still About Chinese Coal – The climate change conference starting in Cancun Monday is doomed to failure. Many factors contribute to this, such as a healthy skepticism about how much should be spent to remediate climate change, but one alone guarantees failure: Chinese coal production and policy. When climate change soared up the American agenda with the election of President Obama, those not swept up in blind optimism were doubtful China could be convinced to go along. The debacle of the Copenhagen summit last year finally brought the administration and its supporters back to reality. Prior to Copenhagen, it was already clear that Chinese coal was an insuperable obstacle to an international agreement on greenhouse gases. The past year has made the situation that much starker.In 2000, the official figure for Chinese coal production was 880 million tons. In less than a decade, it more than tripled to 2.96 billion tons for 2009. In the first quarter of this year, coal production jumped another 28%. China, which was a net exporter of coal as recently as 2008, was the world’s largest importer of coal in the first three quarters of this year and far more in the way of imports are on the way.